Which type of mortgage often involves a monthly charge that is 1/12 of the stated annual rate?

A fixed-rate mortgage is structured in such a way that the borrower pays a consistent monthly payment, which includes both principal and interest, over the life of the loan. The interest portion of this payment is calculated based on the annual interest rate, which is then divided into monthly payments. Hence, if the annual interest rate is, for example, 6%, the monthly interest charge would be 1/12 of that annual rate, effectively translating to a monthly interest rate of 0.5%.

This uniformity in payments is one of the defining characteristics of fixed-rate mortgages, making them appealing to borrowers who prefer the stability of knowing exactly how much their mortgage payment will be each month throughout the duration of the loan term.